What's best way to get insurance for my child when I'm jobless?

As a public service to residents, the Financial Planning Association of San Diego is answering financial questions for readers of The San Diego Union-Tribune. Today’s question – on obtaining health insurance for a child – is answered by Karen Walker, CFP, and Jim Dell, CFP, the executive director of the charitable organization the Professional Alliance for Children.

Q: I recently lost my job and can no longer afford to pay health care premiums for both myself and my child. What can I do to obtain affordable coverage for just my child until I find work and can afford to cover us both again?

A: It is noble of you to think of insuring your child before yourself. Similar to saving more for your child’s education than your own retirement, this instinct reflects a caring parent. But to best protect your child, you should also protect yourself.

Illness and medical bills caused half of the 1.5 million personal bankruptcies in 2001, according to a study published by The Journal Health Affairs. Dr. David Himmelstein, the lead author of the study and an associate professor of medicine at Harvard commented: “Unless you’re Bill Gates you’re just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick.”

Because of the financial threat of a serious illness, and because there are more options for insuring your child than yourself, you should maintain health insurance for both of you.

Unlike coverage for children, insurers can still deny an adult coverage for pre-existing conditions if there has been a significant break in coverage. Under the Health Insurance Portability and Accountability Act, group insurers must cover pre-existing conditions if insurance has been maintained. However, if there has been a significant break in coverage, that is, any 63-day period without creditable coverage, insurers can deny coverage for a pre-existing illness for a period of 12 months after enrollment.

If you no longer can afford COBRA premiums, then consider purchasing for yourself the relatively inexpensive coverage of a catastrophic plan — insurance that kicks in only after high deductibles. This isn’t insurance for those who run to the doctor with each “case of the sniffles” since it won’t pay until you meet the deductible first. But this deductible will be met quickly if you have a heart attack or are diagnosed with cancer.

Most likely, disaster will not strike and you will not need the insurance. But by maintaining coverage, you will have protected yourself from the financial burden of a catastrophic illness. Additionally, when you do obtain a full-time job with health benefits, any pre-existing condition should be covered under your new employer’s group plan because you maintained continuous coverage.

Another option is to seek a part-time job that provides health insurance. For example, if you work 20 hours a week at a well-known ubiquitous coffee establishment, you may become eligible for its health insurance coverage. Look to join a “group plan” to avoid being denied coverage for a pre-existing condition.

Fortunately for your child, under the Affordable Health Care Act signed in 2010, a child’s pre-existing condition must now be covered. Under the new federal rules that took effect last fall, children with chronic health conditions cannot be denied coverage.

California went one step further by not allowing insurers to charge premiums that are more than double the rate of covering healthy children. However, to qualify for this price protection, parents must sign up before the open enrollment period ends March 1, or wait until their child’s next birthday. So look into this ASAP.

The White House estimates that as many as 72,000 uninsured children in California could gain health insurance under the new federal rules, and an additional 90,000 whose current plan excludes coverage for their pre-existing conditions will be able to obtain full coverage.

Adult protection for pre-existing conditions is not scheduled to take effect until 2014.

Alternatively, your child may qualify for Medi-Cal coverage if your income and assets are below certain levels. If you’re above these levels, coverage may still be available under The Healthy Families Program. This program offers low-cost insurance that provides health, dental and vision coverage to children who do not have insurance and do not qualify for no-cost Medi-Cal.

In summary, insure yourself as well as your child. Maintain your health coverage, even if by purchasing low-cost catastrophic coverage, so that any pre-existing conditions will be covered when you are once again employed. Take advantage of Medi-Cal or the Healthy Families Program if you cannot afford to cover your child otherwise.

Finally, be sure to continue to keep up with the ever-changing health care laws. Regulations change rapidly, but there’s plenty of free information on the Internet to help you through.

To submit a question to the FPA of San Diego for possible publication, please send an e-mail to info@fpasandiego.org